The Treasury Department proposed a rule that limited the total amount that could be claimed if taxpayers donated to a charitable fund in lieu of paying state and local taxes. The deduction was capped at $10,000 in Republican tax legislation passed last year.

"The amount otherwise deductible as a charitable contribution must generally be reduced by the amount of the state or local tax credit received or expected to be received, just as it is reduced for many other benefits," the proposed rule read.

Treasury Secretary Steven Mnuchin admitted that the cap, which disproportionately affected New Jersey and other states that already send billions of dollars more to Washington than they receive in services, was used to fund the larger tax cut.

"The proposed rule will uphold that limitation by preventing attempts to convert tax payments into charitable contributions," Mnuchin said.

While he said that the deduction for state and local taxes "predominantly benefited high-income earners," 86 percent of the 44.3 million taxpayers who used the tax break in 2015 earned $200,000 or less, according to the Government Finance Officers Association.

Meanwhile, no one earning less than $200,000 benefited from the tax bill's provisions that lowered the top tax rate or doubled the exemption before imposing a tax on multi-million-dollar estates, virtually none of them small businesses or family farms.

The ruling came despite the fact that more other states have charitable funds, often to use taxpayer subsidies for private schools. Mnuchin said that the new rule would affect only 1 percent of using charitable funds for private school tuition.

New Jerseyans reacted with outrage to the proposal.

"Without any congressional authorization whatsoever, the U.S. Treasury Department just jacked up taxes today on millions of Americans," said Rep. Josh Gottheimer, D-5th Dist.

U.S. Sen. Robert Menendez, D-N.J., a member of the tax-writing Senate Finance Committee, said he would hold up the nomination of Chuck Rettig to run the Internal Revenue Service "until this discriminatory, unfair tax policy is reversed.

"The Trump administration's latest attack on New Jersey's middle class families is as despicable as it was predictable," Menendez said. "These proposed IRS regulations not only defy decades of legal precedent, they are clearly designed to punish states like New Jersey that stood up and fought back to protect our residents from being double-taxed."

And Rep. Bill Pascrell Jr., D-9th Dist., said, "Trump and congressional Republicans have made sport in trying to hurt New Jersey and citizens in the Northeast.

"Angry at those places that didn't support Trump in 2016, they want to shake down 'blue' states for cash," said Pascrell, a member of the tax-writing House Ways and Means Committee. "In the failed GOP tax scam, Republicans stole a crucial lifeline for our state's taxpayers that has been around since the Civil War. And today, they've pulled the rug out from under us once again."

New Jersey and three other states have sued the Trump administration over the deduction cap, saying a "highly rushed and partisan process" resulted in changes to the tax code that infringed on the states' "sovereign authority to determine their own taxation and fiscal policies."

"We are prepared to fight back tooth and nail against any attempts by the IRS or the Trump administration to block localities from setting up charitable funds to help New Jersey taxpayers preserve their deductibility," Gov. Phil Murphy said.

Attorney General Gurbir Grewal threatened further legal action.

"There doesn't appear to be any good basis for the sudden change in policy, except to make it more difficult for states like New Jersey to cope with the backward tax policies the federal government imposed on us last year," Grewal said.

Every member of the New Jersey congressional delegation except Rep. Tom MacArthur, R-3rd Dist., voted against the measure, which would raise the taxes of more than 1 in 10 Garden State households, more than any other state, according to the Tax Policy Center, a research group.

The Republican tax bill signed in December by President Donald Trump would increase the deficit by $1.9 trillion over 10 years, according to the Congressional Budget Office.

The Tax Policy Center said the measure gave 21 percent of the benefits in the first year to the richest 1 percent, more than the 17 percent that goes to the bottom 60 percent.

It also permanently cut taxes for corporations and wealthy Americans while letting the middle-class reductions expire in 2025.

And in New Jersey, more than four in 10 taxpayers claimed that tax break and deducted an average deduction of $17,850 in 2015, according to the Pew Charitable Trusts.

Only residents of New York, Connecticut and California deduct more from federal taxes than New Jerseyans, according the progressive Institute on Taxation and Economic Policy.

At the same time, New Jersey taxpayers sent $31 billion more to Washington in 2015 than they received in services, more than any other state but New York, according to the State University of New York's Rockefeller Institute of Government.